Invesco Buys Stake in Indian Fund Manager

MUMBAI—U.S. money-management firm
Invesco Ltd.
IVZ 0.81%
, in an effort to expand its global footprint, has agreed to acquire a large stake in an Indian mutual-fund company.

Invesco, which manages around $650 billion in assets globally, said on Thursday that it would buy a 49% stake in Religare Asset Management Co., a unit of Delhi-based financial services company
Religare Enterprises Ltd.
532915 0.44%

The companies didn't disclose the size of the investment. But a person involved in the deal said Invesco has agreed to pay about $90 million for the stake.

Religare Asset Management managed $2.6 billion in assets as of late August.

Invesco's entry to India comes just a few months after U.S. mutual-fund firm Fidelity Investments quit its Indian mutual-fund business, which was being run by its affiliate Fidelity Worldwide Investment. Fidelity's fund unit in India notched losses every year since it opened in 2004. In March, the unit was sold to L&T Finance Ltd., part of India's
Larsen & Toubro Group.
500510 0.07%

India's fund industry, which had been growing rapidly until a few years ago, has lately struggled to attract investors. Returns from stock investments haven't kept pace with the high returns provided by gold and real estate, which individual investors now prefer.

Regulatory changes, including one that limited the amount of commission fund companies could pay salespeople, also hurt the sales of mutual funds.

Investors have pulled money out of Indian stock mutual funds for seven out of eight months through August to the tune of $1.2 billion, according to data from the Association of Mutual Funds in India.

Invesco, however, seems unfazed by the slowdown in India's fund industry.

"We think there is a huge potential in India's asset management industry," said
Andrew Lo,
chief executive of Invesco's Asia Pacific unit. Given India's large population and the fact that only a small portion of the people invest in mutual funds, there is a lot of scope for growth, said Mr. Lo.

"At some stage, [stock investors] will come back," said Mr. Lo. This is because India "has a high savings rate, a high inflation and there is a need for people to invest," he added. Mr. Lo noted that that despite the tough conditions, Religare had managed to increase its assets and broken even.

Some other foreign money managers also seem to have an optimistic view. Earlier this year, U.K.-based private-banking group
Schroders
SDR 2.95%
PLC bought a 25% stake in the asset-management arm of India's
Axis Bank Ltd.

Analysts say that while foreign investment is welcome in India's fund industry, companies will need to bring innovative products to attract investors. These could include introducing funds that provide exposure to global investments, said
Rajesh Krishnamoorthy,
managing director of Mumbai-based fund distributor iFAST Financial India. He said there is growing interest among some Indian investors to buy such funds.

The joint venture, Religare Invesco Asset Management Co. will be headed by
Saurabh Nanavati,
chief executive of Religare Asset Management. Invesco currently employs around 600 people in the southern Indian city of Hyderabad, to provide various back-office functions.

Religare was advised on this deal by
J.P. Morgan Chase
& Co. and Indian law firm Amarchand Mangaldas. Invesco was advised by Indian law firm AZB Partners.

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